Katzer (Defendant-Appellee) is a commercial software developer for the model train industry and hobbyists. The plaintiff alleges that the defendant used portions of the downloaded files as part of defendant’s software program that did not comply with terms of the Artistic License. The software did not include the authors’ names, copyright notices, references to the COPYING file that includes the text of the license, identification of plaintiff’s site as the source, and description of the changes made to the copied files.

Plaintiff Jacobsen sought a preliminary injunction against defendant Katzer’s use of the DecoderPro materials.

The appellate court addressed whether the license created conditions or merely covenants that limited the use of the copyrighted material to determine whether the defendants complied with the license. The court noted, based on 9th Circuit precedent, that an open source license is governed by copyright law if the terms include both covenants and conditions that limit the scope of the copyright license. The lower court had failed to make a distinction between covenants and conditions, but treated the license limitations as contractual covenants.

The Federal Circuit concluded that the Artistic License provided for the use of the copyright materials with the right to make modifications and to distribute the software conditioned on the restrictions in the license. The court stated that “it is outside the scope of the Artistic License to modify and distribute the copyrighted materials without copyright notices and a tracking of modifications from the original computer files.” The court noted the importance of conditions to the copyright owner’s ability to retain the benefit from work performed by downstream users.

The court relied on reasoning by other circuit court of appeals regarding copyright holder's rights. “Copyright holders who engage in open source licensing have the right to control the modification and distribution of copyrighted material.” The court found that the license instructed the downloader to make other arrangement with the copyright holder if he did not assent to the license conditions.